1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:18,040 --> 00:00:21,040 Speaker 2: Hello and welcome to another episode of the Authoughts podcast. 3 00:00:21,160 --> 00:00:22,520 Speaker 2: I'm Tracy Alloway. 4 00:00:22,280 --> 00:00:23,640 Speaker 1: And I'm Joe. Why isn't thal. 5 00:00:24,160 --> 00:00:28,080 Speaker 2: Joe, if you were a Roman general or a feudal 6 00:00:28,120 --> 00:00:31,920 Speaker 2: lord and you wanted to wage war on your next 7 00:00:31,920 --> 00:00:34,240 Speaker 2: door neighbors, I don't know. This is completely hypothetical. 8 00:00:34,479 --> 00:00:35,959 Speaker 1: Yeah, what time of year? 9 00:00:36,200 --> 00:00:36,400 Speaker 3: Yes? 10 00:00:36,720 --> 00:00:39,720 Speaker 2: Really, what time of year do you think would be 11 00:00:39,760 --> 00:00:41,320 Speaker 2: the best time to actually do it? 12 00:00:42,560 --> 00:00:44,720 Speaker 1: You know, I haven't thought about this before. If I'm 13 00:00:44,720 --> 00:00:46,000 Speaker 1: being totally honest. 14 00:00:45,720 --> 00:00:47,919 Speaker 2: You're not sitting at home thinking about if you were 15 00:00:47,920 --> 00:00:49,800 Speaker 2: a Roman general, not all hours of the day. 16 00:00:49,880 --> 00:00:52,640 Speaker 1: I'm the one guy who doesn't think about stuff like that. 17 00:00:52,760 --> 00:00:54,600 Speaker 1: I don't know much about Rome go on. 18 00:00:55,400 --> 00:00:58,720 Speaker 2: Okay, So for much of human history, if you were 19 00:00:58,760 --> 00:01:00,760 Speaker 2: going to go to war, you would I try to 20 00:01:00,840 --> 00:01:04,400 Speaker 2: avoid certain times of year, and those times were generally 21 00:01:04,760 --> 00:01:08,480 Speaker 2: the spring sewing season and the fall harvest. And there's 22 00:01:08,520 --> 00:01:10,520 Speaker 2: two reasons you would do that. One is because a 23 00:01:10,600 --> 00:01:14,360 Speaker 2: lot of your soldiers are actually farmers. Okay, they're part 24 00:01:14,360 --> 00:01:17,480 Speaker 2: time soldiers, so their day job is farming. And the 25 00:01:17,480 --> 00:01:20,160 Speaker 2: second one is you don't want to completely disrupt your 26 00:01:20,160 --> 00:01:20,759 Speaker 2: food supply. 27 00:01:21,319 --> 00:01:23,080 Speaker 1: Right, that makes a ton of sense. I hadn't thought 28 00:01:23,120 --> 00:01:24,840 Speaker 1: about that, but yes, it makes a ton of sense, 29 00:01:25,000 --> 00:01:25,360 Speaker 1: all right. 30 00:01:25,400 --> 00:01:28,600 Speaker 2: So fast forward to twenty twenty six, and we've clearly 31 00:01:28,880 --> 00:01:33,280 Speaker 2: forgotten much of human history because we have a US 32 00:01:33,520 --> 00:01:37,759 Speaker 2: Israeli war against Iran that is coming at perhaps the 33 00:01:37,800 --> 00:01:40,679 Speaker 2: worst possible time in terms of agriculture. 34 00:01:41,120 --> 00:01:43,200 Speaker 1: You know what, again, I hadn't thought about this at all. 35 00:01:43,319 --> 00:01:46,720 Speaker 1: So I did learn over the last week. You know, 36 00:01:46,760 --> 00:01:49,680 Speaker 1: when I think about the shutdown of the straight up 37 00:01:49,880 --> 00:01:54,000 Speaker 1: mus and so forth, obviously I think oil and energy. 38 00:01:54,480 --> 00:01:57,560 Speaker 1: I have become aware through your writing and others that 39 00:01:57,640 --> 00:02:02,520 Speaker 1: it's also a major choke point thruway for related food stuffs, 40 00:02:02,520 --> 00:02:06,440 Speaker 1: including fertilizer. I had not heard anything about the timing element, however, 41 00:02:06,520 --> 00:02:07,760 Speaker 1: until you just boil it up just now. 42 00:02:07,960 --> 00:02:11,280 Speaker 2: Yeah, So everyone's getting ready for spring planting at the moment, 43 00:02:11,360 --> 00:02:14,600 Speaker 2: So this is precisely when you theoretically would be using 44 00:02:14,720 --> 00:02:17,480 Speaker 2: a lot of fertilizer. And just in the past week 45 00:02:17,600 --> 00:02:21,120 Speaker 2: or so, we've seen prices for urea, which is you know, 46 00:02:21,280 --> 00:02:24,160 Speaker 2: one of the I guess most popular types of fertilizer. 47 00:02:24,200 --> 00:02:27,400 Speaker 2: Those have shot up like twenty five percent. Yeah, It's 48 00:02:27,400 --> 00:02:29,120 Speaker 2: also fascinating to me. I didn't know this, but we 49 00:02:29,160 --> 00:02:31,800 Speaker 2: have all these different types of urea. So you have 50 00:02:31,880 --> 00:02:36,480 Speaker 2: Egyptian granular urea, New Orleans urea. We're going to talk 51 00:02:36,480 --> 00:02:38,360 Speaker 2: about all of it. I've wanted to do a fertilizer 52 00:02:38,400 --> 00:02:40,840 Speaker 2: episode for a long time. I want to talk about 53 00:02:40,840 --> 00:02:44,480 Speaker 2: what's going on with the Moroccan fertilizer industry as well. 54 00:02:44,520 --> 00:02:48,480 Speaker 2: But I am weirdly excited to be talking about urea today. 55 00:02:48,880 --> 00:02:49,679 Speaker 1: I'm looking forward to it. 56 00:02:49,760 --> 00:02:52,119 Speaker 2: Let's do it, all right, and we have the perfect guest. 57 00:02:52,240 --> 00:02:54,720 Speaker 2: We're going to be speaking with Alexis Maxwell. She's an 58 00:02:54,760 --> 00:02:58,160 Speaker 2: analyst on the Bloomberg Intelligence Agriculture team and she's been 59 00:02:58,200 --> 00:03:00,920 Speaker 2: writing a lot about this. So Lexus, thank you so 60 00:03:01,000 --> 00:03:01,760 Speaker 2: much for coming on a. 61 00:03:01,840 --> 00:03:03,639 Speaker 3: Loots Well, thank you for having me. 62 00:03:04,120 --> 00:03:07,200 Speaker 2: Is that framing correct? Is this kind of not a 63 00:03:07,280 --> 00:03:10,520 Speaker 2: great time, slash the worst possible time to be driving 64 00:03:10,639 --> 00:03:11,959 Speaker 2: the price of fertilizer up? 65 00:03:13,000 --> 00:03:17,040 Speaker 3: Yeah, definitely. I couldn't think of a worse time to 66 00:03:17,160 --> 00:03:20,919 Speaker 3: have a supply side shock and resulting surge and fertilizer 67 00:03:21,040 --> 00:03:27,040 Speaker 3: prices for farmers. Effectively, just about everywhere, the second quarter 68 00:03:27,240 --> 00:03:31,360 Speaker 3: is the timeline when the Northern Hemisphere starts their planting season. 69 00:03:31,760 --> 00:03:35,520 Speaker 4: What is your real Yeah, so, urea is the. 70 00:03:35,440 --> 00:03:39,960 Speaker 3: Most commonly used form of nitrogen. Crops are going to 71 00:03:40,040 --> 00:03:43,480 Speaker 3: demand a variety of fertilizers, but the big three that 72 00:03:43,560 --> 00:03:47,320 Speaker 3: you have to use are going to be your nitrogen, phosphate, 73 00:03:47,520 --> 00:03:50,880 Speaker 3: and potash. And in the industry we call it your npks. 74 00:03:51,720 --> 00:03:55,280 Speaker 3: Urea is a form of nitrogen. I think about this 75 00:03:55,520 --> 00:03:58,960 Speaker 3: like a step ladder. If you want urea, the way 76 00:03:58,960 --> 00:04:02,200 Speaker 3: that you get it is by starting first with natural gas, 77 00:04:02,520 --> 00:04:05,640 Speaker 3: you crack it into ammonia, and then you run another 78 00:04:05,840 --> 00:04:08,480 Speaker 3: chemical conversion on it and you turn it into a 79 00:04:08,560 --> 00:04:13,120 Speaker 3: granular product that is easy to apply, easy to transport, 80 00:04:13,160 --> 00:04:16,520 Speaker 3: and is about forty six percent nitrogen. And for those 81 00:04:16,560 --> 00:04:21,240 Speaker 3: of you who've never applied fertilizer or planted crops, you 82 00:04:21,480 --> 00:04:24,359 Speaker 3: probably bought some flowers at some point in your life 83 00:04:24,440 --> 00:04:26,720 Speaker 3: and you get a little packet that has some like 84 00:04:26,960 --> 00:04:29,279 Speaker 3: white crystals in it. Yeah, you're going to have yourria 85 00:04:29,320 --> 00:04:30,920 Speaker 3: in there to your flowers were out. 86 00:04:31,160 --> 00:04:33,920 Speaker 2: I don't know that that's interesting. Okay, So one thing 87 00:04:34,080 --> 00:04:37,000 Speaker 2: I know about fertilizer other than most of it smells 88 00:04:37,040 --> 00:04:39,480 Speaker 2: pretty bad. But you always hear this thing about the 89 00:04:39,480 --> 00:04:44,240 Speaker 2: haber Bosch process and how the guy who basically, I 90 00:04:44,240 --> 00:04:48,320 Speaker 2: guess invented the way we get fertilizer nowadays is responsible 91 00:04:48,440 --> 00:04:52,080 Speaker 2: both for a massive boom in the human population because 92 00:04:52,080 --> 00:04:55,320 Speaker 2: everyone gets to eat more, but also responsible for a 93 00:04:55,360 --> 00:04:58,040 Speaker 2: lot of death at the same time. Can you talk 94 00:04:58,080 --> 00:05:00,320 Speaker 2: about that, I guess the origins of all of this. 95 00:05:01,440 --> 00:05:04,880 Speaker 3: Yeah, I think I'll call it one of the greatest 96 00:05:04,880 --> 00:05:08,280 Speaker 3: paradoxes of humanity, you know, Tracy, I can't think of 97 00:05:08,600 --> 00:05:12,920 Speaker 3: an invention that, on one hand is more responsible for 98 00:05:13,080 --> 00:05:17,479 Speaker 3: billions of lives but also at the same time generates 99 00:05:17,480 --> 00:05:20,080 Speaker 3: a product that is used as a weapon of war. 100 00:05:20,640 --> 00:05:22,760 Speaker 3: I think some people will tell you, you know, with 101 00:05:22,839 --> 00:05:27,400 Speaker 3: the global population just over seven billion, about half of 102 00:05:27,480 --> 00:05:29,960 Speaker 3: the people on the Earth today are here because of 103 00:05:30,080 --> 00:05:35,279 Speaker 3: conventional fertilizers. If we were to, let's just say tomorrow, 104 00:05:35,680 --> 00:05:39,960 Speaker 3: stop using conventional fertilizer, and we converted everything back to 105 00:05:40,120 --> 00:05:44,320 Speaker 3: organic and we formed every single acre of arable land 106 00:05:44,360 --> 00:05:47,040 Speaker 3: out there, they say that the Earth could really only 107 00:05:47,040 --> 00:05:51,640 Speaker 3: support a population of about four billion people. So conventional 108 00:05:51,720 --> 00:05:57,040 Speaker 3: fertilizer is I think the most important invention to the 109 00:05:57,080 --> 00:05:59,920 Speaker 3: most number of people on this planet. 110 00:06:00,160 --> 00:06:05,000 Speaker 1: Okay, explain to me. So urea comes from its downstream 111 00:06:05,120 --> 00:06:09,160 Speaker 1: from natural gas, and so explain to me, like what happens, 112 00:06:09,360 --> 00:06:11,880 Speaker 1: Like why not ship the gas? I mean, right now 113 00:06:11,920 --> 00:06:14,679 Speaker 1: nothing is shipping or very little is moving through the street. 114 00:06:15,080 --> 00:06:18,400 Speaker 1: But why is the process such that the first step, 115 00:06:18,480 --> 00:06:22,680 Speaker 1: the transformation of natural gas to urea, happens at the 116 00:06:22,800 --> 00:06:26,000 Speaker 1: source rather than later down somewhere else on the supply chain. 117 00:06:27,080 --> 00:06:31,520 Speaker 3: Yeah, so you'll find nitrogen fertilizer plants will often be 118 00:06:31,680 --> 00:06:36,440 Speaker 3: co located with natural gas because to ship natural gas 119 00:06:36,480 --> 00:06:39,400 Speaker 3: you have to chill it to very low temperatures and 120 00:06:39,440 --> 00:06:44,000 Speaker 3: it's very expensive to move it. In contrast, urea is 121 00:06:44,400 --> 00:06:47,080 Speaker 3: it's a granular. You can ship it in a as 122 00:06:47,120 --> 00:06:50,840 Speaker 3: a bulk commodity item. It's much cheaper to do it 123 00:06:50,920 --> 00:06:53,760 Speaker 3: that way, and you can reach a vast number of people. 124 00:06:54,480 --> 00:06:57,400 Speaker 3: You'll find UREA plants around the world, but most of 125 00:06:57,440 --> 00:07:01,240 Speaker 3: them are really located in places with low gas because 126 00:07:01,400 --> 00:07:05,640 Speaker 3: this is a competitive commodity industry. So you'll see these 127 00:07:05,680 --> 00:07:10,080 Speaker 3: plants in places like Russia, the Middle East, the United States, 128 00:07:10,520 --> 00:07:11,040 Speaker 3: and China. 129 00:07:11,720 --> 00:07:14,160 Speaker 1: Yeah, it reminds me a little bit of like aluminum, 130 00:07:14,200 --> 00:07:16,440 Speaker 1: Like here is this thing that it's like Okay, you 131 00:07:16,480 --> 00:07:18,800 Speaker 1: could ship it anywhere in the world. It's a lot 132 00:07:18,840 --> 00:07:21,960 Speaker 1: easier to ship aluminum than it is to transport electricity 133 00:07:22,040 --> 00:07:26,160 Speaker 1: via batteries. So you have the aluminum processing co located 134 00:07:26,160 --> 00:07:28,320 Speaker 1: where you have cheap electricity, and then of course it's 135 00:07:28,320 --> 00:07:31,000 Speaker 1: sort of trivial to move it elsewhere. How much of 136 00:07:31,040 --> 00:07:35,400 Speaker 1: the world's urea is in conflict affected regions right now? 137 00:07:37,280 --> 00:07:39,840 Speaker 3: I just want to add one thing too about the 138 00:07:39,960 --> 00:07:43,040 Speaker 3: urea and why we ship it. It has a very 139 00:07:43,080 --> 00:07:46,840 Speaker 3: strong seasonality. So you know, when you run a large 140 00:07:46,920 --> 00:07:50,600 Speaker 3: chemical manufacturing plant, you want to capture the economies of scale, 141 00:07:51,040 --> 00:07:53,080 Speaker 3: and you want to run your plant three hundred and 142 00:07:53,160 --> 00:07:56,040 Speaker 3: sixty five days a year. But the problem that we 143 00:07:56,080 --> 00:07:59,360 Speaker 3: see in the fertilizer industry is that farmers only demand 144 00:07:59,520 --> 00:08:03,160 Speaker 3: urea a very short period of the year, let's just say, 145 00:08:03,280 --> 00:08:05,920 Speaker 3: like two months of the year. So that puts these 146 00:08:05,960 --> 00:08:10,640 Speaker 3: manufacturers in its sort of classic snake and egg supply 147 00:08:10,760 --> 00:08:13,120 Speaker 3: chain problem. What do you do with the material the 148 00:08:13,160 --> 00:08:15,559 Speaker 3: rest of the year. So it's much easier to ship 149 00:08:15,600 --> 00:08:17,440 Speaker 3: it out than it is to store it and keep 150 00:08:17,480 --> 00:08:20,560 Speaker 3: it on hand for farmers ten months out and to 151 00:08:20,600 --> 00:08:21,640 Speaker 3: take that price risk. 152 00:08:22,240 --> 00:08:26,120 Speaker 2: Oh wait, now, I'm really interested how storable is UIA actually, 153 00:08:26,160 --> 00:08:28,520 Speaker 2: because I think about those little packets. They seem like 154 00:08:28,680 --> 00:08:30,160 Speaker 2: they could last for quite a while. 155 00:08:30,120 --> 00:08:34,360 Speaker 3: So while yeah, if you have urea and you can 156 00:08:34,400 --> 00:08:37,000 Speaker 3: put it in a warehouse and you can have it 157 00:08:37,080 --> 00:08:40,679 Speaker 3: covered from the rain and possibly other elements, you can 158 00:08:40,800 --> 00:08:44,040 Speaker 3: probably keep it on hand for at least a couple 159 00:08:44,080 --> 00:08:48,120 Speaker 3: of months, probably three, four or five months. However, you know, 160 00:08:48,160 --> 00:08:50,920 Speaker 3: if you have a warehouse, the way that you really 161 00:08:50,960 --> 00:08:53,600 Speaker 3: maximize the value of a warehouse is by turning the 162 00:08:53,600 --> 00:08:57,560 Speaker 3: inventory in your warehouse and selling that. So when you 163 00:08:57,679 --> 00:09:01,880 Speaker 3: put urea in a warehouse, your takeoking on price risk 164 00:09:02,200 --> 00:09:04,560 Speaker 3: over the period that since that it will sit in 165 00:09:04,640 --> 00:09:06,960 Speaker 3: storage and you're not using your warehouse for what it's 166 00:09:06,960 --> 00:09:10,200 Speaker 3: really designed for. So a lot of what we see 167 00:09:10,360 --> 00:09:14,760 Speaker 3: with these UREA facilities it's making ship. There isn't a 168 00:09:15,200 --> 00:09:18,560 Speaker 3: strategic reserve of urea the same way that we would 169 00:09:18,640 --> 00:09:21,960 Speaker 3: have it like in oil for example, which is partially 170 00:09:22,000 --> 00:09:26,480 Speaker 3: why this crisis is really compounding for urea at this 171 00:09:26,640 --> 00:09:32,160 Speaker 3: time of year. We don't have significant storage to replace 172 00:09:32,200 --> 00:09:35,480 Speaker 3: what we're losing in the Middle East. Now the Middle East, 173 00:09:35,760 --> 00:09:39,120 Speaker 3: if we look at the countries that are located along 174 00:09:39,160 --> 00:09:43,480 Speaker 3: the Persian Gulf. About forty five percent of the world's 175 00:09:43,520 --> 00:09:47,240 Speaker 3: tradable urea comes from the Middle East, and about about 176 00:09:47,240 --> 00:09:51,400 Speaker 3: twenty percent of the ammonia comes from along the Middle 177 00:09:51,400 --> 00:09:54,840 Speaker 3: East as well. So if you are in the business 178 00:09:54,880 --> 00:09:58,040 Speaker 3: of trying to procure a replacement for what we've lost 179 00:09:58,080 --> 00:10:01,559 Speaker 3: in the Middle East, there's not really a good next 180 00:10:01,600 --> 00:10:05,600 Speaker 3: best alternative at this point in time. You could try 181 00:10:05,880 --> 00:10:08,520 Speaker 3: going to Russia to procure material, but a lot of 182 00:10:08,559 --> 00:10:13,720 Speaker 3: the West has sanctioned Russia and their fertilizer products. You 183 00:10:13,760 --> 00:10:16,760 Speaker 3: could try going to China, but China has an export 184 00:10:16,840 --> 00:10:20,520 Speaker 3: band currently on their urea fertilizers and that's done to 185 00:10:20,600 --> 00:10:25,440 Speaker 3: protect their domestic industry and their farmers, and that really 186 00:10:25,520 --> 00:10:28,760 Speaker 3: kind of leaves you left over with places like Egypt 187 00:10:29,480 --> 00:10:30,960 Speaker 3: or maybe the United States. 188 00:10:32,480 --> 00:10:35,120 Speaker 1: So is most of the eurea from the Middle East 189 00:10:35,160 --> 00:10:36,480 Speaker 1: does most of it going to Asia? 190 00:10:37,320 --> 00:10:40,160 Speaker 3: So the Middle East is a great supplier for urea. 191 00:10:40,440 --> 00:10:44,640 Speaker 3: They ship effectively everywhere every single day they're in the market, 192 00:10:44,840 --> 00:10:47,560 Speaker 3: you know, a urea plant in the Middle East, just 193 00:10:47,600 --> 00:10:50,120 Speaker 3: to keep their inventory sort of in balance. A lot 194 00:10:50,160 --> 00:10:53,000 Speaker 3: of these producers are loading one vessel and shipping it 195 00:10:53,080 --> 00:10:57,920 Speaker 3: every single day, and so where the shipments go from 196 00:10:57,960 --> 00:10:59,959 Speaker 3: the Middle East depends on what time of year it is. 197 00:11:00,480 --> 00:11:04,959 Speaker 3: So when farmers are demanding product, like European farmers or 198 00:11:05,000 --> 00:11:07,720 Speaker 3: American farmers, in the second quarter, you'll see more of 199 00:11:07,760 --> 00:11:11,040 Speaker 3: the Middle Eastern EUREA go there. But in the second 200 00:11:11,080 --> 00:11:13,280 Speaker 3: half of the year, you're going to see a lot 201 00:11:13,320 --> 00:11:16,680 Speaker 3: more of the UREA move to places like India and Brazil, 202 00:11:17,240 --> 00:11:20,800 Speaker 3: places that have a flipped season, to the northern Hemisphere 203 00:11:20,840 --> 00:11:22,120 Speaker 3: and plant at a different time. 204 00:11:23,559 --> 00:11:27,000 Speaker 2: Okay, this is my chance. What's the deal with fertilizer 205 00:11:27,240 --> 00:11:29,960 Speaker 2: in Morocco? Because I remember when I was in Abu Dhabi, 206 00:11:30,360 --> 00:11:33,480 Speaker 2: there were a lot of you know, big national companies 207 00:11:33,480 --> 00:11:37,319 Speaker 2: that were very excited about striking some sort of fertilizer 208 00:11:37,360 --> 00:11:39,480 Speaker 2: deals with Morocco. What's going on there? 209 00:11:40,720 --> 00:11:43,640 Speaker 3: Yeah, So Morocco is among the world's one of the 210 00:11:43,640 --> 00:11:47,520 Speaker 3: world's largest producers of phosphate. So phosphate is one of 211 00:11:47,600 --> 00:11:53,760 Speaker 3: those critical NPK nutrients. Morocco is expanding their phosphate production 212 00:11:54,000 --> 00:11:57,880 Speaker 3: and their low cost and because of their location in Africa, 213 00:11:58,080 --> 00:12:01,160 Speaker 3: it's relatively cheap freight to get it to move around 214 00:12:01,160 --> 00:12:05,480 Speaker 3: the world. I think of phosphate to the Moroccan economy 215 00:12:05,559 --> 00:12:23,640 Speaker 3: a little bit like oil to the Saudi economy. 216 00:12:25,320 --> 00:12:27,360 Speaker 1: So if I'm looking at a ten year chart of 217 00:12:27,960 --> 00:12:31,560 Speaker 1: back to Egyptian but Egyptian urea prices, they soared to 218 00:12:31,720 --> 00:12:35,040 Speaker 1: over eleven hundred dollars a metric ton in the wake 219 00:12:35,120 --> 00:12:38,720 Speaker 1: of Russia's invasion of Ukraine. That peak looks like around 220 00:12:38,800 --> 00:12:43,400 Speaker 1: spring April twenty twenty two they got down to about 221 00:12:43,440 --> 00:12:45,520 Speaker 1: a little under a three hundred dollars a metric ton, 222 00:12:45,760 --> 00:12:49,040 Speaker 1: and twenty twenty four they're close to six hundred. Now, 223 00:12:49,520 --> 00:12:51,720 Speaker 1: before we get to the effects of what's six hundred 224 00:12:51,800 --> 00:12:55,000 Speaker 1: a ton urea? What the impact of that is, What 225 00:12:55,160 --> 00:12:58,800 Speaker 1: was the impact on the twenty twenty two price bike, 226 00:12:58,960 --> 00:13:01,600 Speaker 1: What were the domino effect of that massive serve? 227 00:13:02,920 --> 00:13:08,120 Speaker 3: Yes, the twenty twenty two price surge was really two 228 00:13:08,160 --> 00:13:12,960 Speaker 3: supply side shocks. In twenty twenty one, China started their 229 00:13:13,080 --> 00:13:17,120 Speaker 3: export ban on urea and phosphate fertilizers, and the importance 230 00:13:17,160 --> 00:13:20,120 Speaker 3: of China to the fertilizer market they really it cannot 231 00:13:20,160 --> 00:13:24,520 Speaker 3: be overstated. So China is the marginal producer for urea 232 00:13:24,679 --> 00:13:29,920 Speaker 3: and phosphate. So generally speaking, when China is exporting fertilizers 233 00:13:30,000 --> 00:13:33,440 Speaker 3: prices globally will tend to fall, and when China is 234 00:13:33,679 --> 00:13:36,800 Speaker 3: out of the market, prices rise to the next level 235 00:13:36,840 --> 00:13:41,880 Speaker 3: of production costs. And so in September of twenty twenty one, 236 00:13:42,040 --> 00:13:45,400 Speaker 3: when China slammed the door on exports, the world had 237 00:13:45,440 --> 00:13:50,400 Speaker 3: to really scrambled for alternatives to supply. And then when 238 00:13:50,400 --> 00:13:53,360 Speaker 3: we had the Russian invasion into Ukraine in the first 239 00:13:53,440 --> 00:13:57,360 Speaker 3: quarter of twenty twenty two, we saw fertilizer prices spike 240 00:13:57,960 --> 00:14:01,920 Speaker 3: on top of that because the world was unclear about 241 00:14:01,960 --> 00:14:06,680 Speaker 3: how we could source fertilizers from Russia. So Russia is 242 00:14:06,720 --> 00:14:10,040 Speaker 3: a high volume exporter, they're a low cost producer, and 243 00:14:10,160 --> 00:14:15,040 Speaker 3: Russia also is probably really the only country that will 244 00:14:15,080 --> 00:14:19,800 Speaker 3: do high volume exports of nitrogen, phosphate and potash. You 245 00:14:19,960 --> 00:14:22,240 Speaker 3: name the flavor of fertilizer that you want, you can 246 00:14:22,240 --> 00:14:24,880 Speaker 3: get it out of Russia. And so there was just 247 00:14:25,000 --> 00:14:28,120 Speaker 3: this general surge in the industry to try to find 248 00:14:28,160 --> 00:14:31,760 Speaker 3: an alternative, you know, And I mentioned earlier that when 249 00:14:31,760 --> 00:14:36,000 Speaker 3: we took China out of the market, fertilizer prices had 250 00:14:36,040 --> 00:14:40,240 Speaker 3: to go above the marginal producer level production costs in 251 00:14:40,320 --> 00:14:43,880 Speaker 3: China and did in New supply and the way that 252 00:14:43,960 --> 00:14:48,280 Speaker 3: the nitrogen cost curve is oriented. That meant the world 253 00:14:48,400 --> 00:14:50,760 Speaker 3: had to go to Europe to find new sources of 254 00:14:50,880 --> 00:14:54,520 Speaker 3: nitrogen and turn those plants on in order to meet demand. Well, 255 00:14:54,560 --> 00:14:57,960 Speaker 3: at the time, the price for natural gas in Europe, 256 00:14:58,000 --> 00:15:02,000 Speaker 3: which is the feedstock for ammonia and then eventually urea, 257 00:15:02,440 --> 00:15:07,400 Speaker 3: was surging over sixty dollars per mmbtu, And so if 258 00:15:07,440 --> 00:15:11,280 Speaker 3: you wanted to run the economics of what it costs 259 00:15:11,320 --> 00:15:14,520 Speaker 3: to make ammonia, it's a very easy back of a 260 00:15:14,600 --> 00:15:18,480 Speaker 3: napkin math to do this. It takes about thirty four 261 00:15:18,520 --> 00:15:22,880 Speaker 3: to thirty six mmbtus of natural gas to produce one 262 00:15:22,960 --> 00:15:26,160 Speaker 3: ton of ammonia. But if we needed thirty six mmbtus 263 00:15:26,240 --> 00:15:30,080 Speaker 3: to make ammonia and I'm paying sixty dollars for natural gas, 264 00:15:30,240 --> 00:15:32,640 Speaker 3: I'm looking at an ammonia price that's over twenty one 265 00:15:32,680 --> 00:15:34,200 Speaker 3: hundred dollars. 266 00:15:34,680 --> 00:15:37,200 Speaker 2: So if I'm a farmer in the US right now 267 00:15:37,280 --> 00:15:42,240 Speaker 2: and I'm getting ready to plant spring weeds, what am 268 00:15:42,240 --> 00:15:44,920 Speaker 2: I doing when I you know, I'm hopefully I have 269 00:15:44,920 --> 00:15:47,080 Speaker 2: a Bloomberg terminal That would be nice as a farmer, 270 00:15:47,120 --> 00:15:49,040 Speaker 2: But I'm looking at the chart of the price spike 271 00:15:49,200 --> 00:15:52,480 Speaker 2: in something like UREA. What am I thinking to myself 272 00:15:52,480 --> 00:15:54,680 Speaker 2: in terms of offsetting this cost? 273 00:15:56,160 --> 00:16:01,280 Speaker 3: Yeah, so farmers will have probably four options or decisions 274 00:16:01,320 --> 00:16:03,520 Speaker 3: that they can make at this point. And I will 275 00:16:03,520 --> 00:16:06,760 Speaker 3: tell you I do think that US farmers are probably 276 00:16:06,960 --> 00:16:11,120 Speaker 3: best poised to whether this storm compared to farmers in 277 00:16:11,640 --> 00:16:15,520 Speaker 3: let's say, the European Union or India. At this point, 278 00:16:16,360 --> 00:16:18,400 Speaker 3: if you're a farmer, what you can choose to do 279 00:16:18,800 --> 00:16:23,840 Speaker 3: is you can reduce your application rates. You can switch 280 00:16:23,880 --> 00:16:27,400 Speaker 3: what you're planting, let's say, from corn, to shift into soetins, 281 00:16:27,440 --> 00:16:33,160 Speaker 3: which demands significantly less amounts of nitrogen. The third option is, 282 00:16:33,200 --> 00:16:36,680 Speaker 3: as a US farmer, you can switch among your nitrogen products. 283 00:16:37,200 --> 00:16:40,200 Speaker 3: And then the last worst option is just not plant 284 00:16:40,240 --> 00:16:40,600 Speaker 3: at all. 285 00:16:41,200 --> 00:16:43,560 Speaker 1: And what do you see happening right now? There was 286 00:16:43,600 --> 00:16:46,680 Speaker 1: a headline, by the way earlier that I saw. We're 287 00:16:46,760 --> 00:16:50,880 Speaker 1: already senators in DC are hearing from farmers talking about 288 00:16:50,920 --> 00:16:53,600 Speaker 1: wanting to get relieved from wanting to get some sort 289 00:16:53,640 --> 00:16:56,480 Speaker 1: of bailout. It's not as extreme, but you know, the 290 00:16:56,520 --> 00:16:58,680 Speaker 1: price is to some extent global, and so we see 291 00:16:58,680 --> 00:17:01,480 Speaker 1: the New Orleans price that's shooting up too, that's at 292 00:17:01,480 --> 00:17:04,480 Speaker 1: five hundred and seventy five hundred and seventy pounds a time. 293 00:17:05,640 --> 00:17:08,959 Speaker 3: Yeah, so this is really all you know as in economics, 294 00:17:08,960 --> 00:17:11,280 Speaker 3: this is all really relative. So I want to just 295 00:17:11,280 --> 00:17:14,320 Speaker 3: give some context as to why even though you know, 296 00:17:14,440 --> 00:17:18,399 Speaker 3: Egypt urea is I think today close to seven hundred 297 00:17:18,440 --> 00:17:21,480 Speaker 3: dollars still below about one third below the twenty two 298 00:17:21,560 --> 00:17:24,720 Speaker 3: price spike, what's happening now is probably the worst it's 299 00:17:24,760 --> 00:17:28,240 Speaker 3: ever been for farmers looking to buy nitrogen. And we 300 00:17:28,359 --> 00:17:31,159 Speaker 3: measure that in the industry by just looking at the 301 00:17:31,800 --> 00:17:34,360 Speaker 3: urea price to the crop price ratio. 302 00:17:34,600 --> 00:17:37,160 Speaker 1: Oh that makes sense, and yeah. 303 00:17:37,000 --> 00:17:40,040 Speaker 3: It's all relative. You know that less incremental ton of 304 00:17:40,160 --> 00:17:42,639 Speaker 3: nitrogen is going to give you a yield bump, So 305 00:17:42,720 --> 00:17:45,119 Speaker 3: you kind of you want to run the economics and 306 00:17:45,160 --> 00:17:47,840 Speaker 3: the agronomy on if I spend a little bit more 307 00:17:47,880 --> 00:17:50,320 Speaker 3: on my nitrogen, am I going to get that yield bump? 308 00:17:50,440 --> 00:17:52,040 Speaker 3: So I need to know what the price of the 309 00:17:52,080 --> 00:17:55,760 Speaker 3: commodity is. And if I were today to look at 310 00:17:55,800 --> 00:18:00,639 Speaker 3: the urea to corn price ratio, yeah, week it was 311 00:18:00,680 --> 00:18:04,199 Speaker 3: that one twenty four. The highest it's ever been is 312 00:18:04,240 --> 00:18:07,760 Speaker 3: one forty three. And with the price surge that we're 313 00:18:07,800 --> 00:18:12,320 Speaker 3: seeing again, this week. I expect once we have prices 314 00:18:12,440 --> 00:18:15,240 Speaker 3: settle on Friday, that will set a new record for 315 00:18:15,280 --> 00:18:18,159 Speaker 3: the most expensive that Urea has ever been to a 316 00:18:18,240 --> 00:18:18,919 Speaker 3: porn farmer. 317 00:18:19,119 --> 00:18:20,919 Speaker 1: Tracy. This is going to make a good chart in 318 00:18:20,960 --> 00:18:24,439 Speaker 1: the newsletter because I just charted it as as our 319 00:18:24,480 --> 00:18:26,600 Speaker 1: guest was talking about it. And yes, we are very 320 00:18:26,640 --> 00:18:29,359 Speaker 1: close to this. So even though on the pure yourrea 321 00:18:29,440 --> 00:18:32,240 Speaker 1: price not necessarily at all time highs, but relative to 322 00:18:32,320 --> 00:18:35,120 Speaker 1: chorn we are very close to all the time highs there. Yeah, 323 00:18:35,160 --> 00:18:36,200 Speaker 1: I think this is important. 324 00:18:36,320 --> 00:18:39,520 Speaker 2: So the other thing I wanted to ask is you 325 00:18:39,520 --> 00:18:42,040 Speaker 2: you've heard I mean, it's a running joke on the 326 00:18:42,080 --> 00:18:44,880 Speaker 2: show that farmers are always complaining about something, But one 327 00:18:44,880 --> 00:18:48,720 Speaker 2: of the things they've complained about is fertilizer prices. Even 328 00:18:48,880 --> 00:18:53,119 Speaker 2: before you know the Iran situation, even before the twenty 329 00:18:53,280 --> 00:18:57,520 Speaker 2: twenty two price spike, there's been some grumbling what's going 330 00:18:57,560 --> 00:19:00,399 Speaker 2: on in the structure of the market that aims to 331 00:19:00,440 --> 00:19:03,640 Speaker 2: make fertilizer prices an issue for the farming industry. 332 00:19:04,760 --> 00:19:07,840 Speaker 3: Yeah, So the farming industry in the US right now 333 00:19:08,240 --> 00:19:14,240 Speaker 3: is margins are incredibly thin. If we look at like, 334 00:19:14,320 --> 00:19:18,120 Speaker 3: for example, the difference between what farmers pay for their 335 00:19:18,119 --> 00:19:22,560 Speaker 3: inputs versus the prices that they get for their agriculture products. 336 00:19:22,880 --> 00:19:26,480 Speaker 3: It hit a record negative spread in January. There's a 337 00:19:26,480 --> 00:19:30,320 Speaker 3: lot of price pain out there in the US farm economy, 338 00:19:30,720 --> 00:19:34,040 Speaker 3: and we're seeing Chapter twelve bankruptcies. Chapter twelve is a 339 00:19:34,080 --> 00:19:38,359 Speaker 3: specialized form of bankruptcy for farms and fisheries starting to 340 00:19:38,400 --> 00:19:40,520 Speaker 3: pick up here in twenty twenty five. So I'll say 341 00:19:40,800 --> 00:19:44,600 Speaker 3: the economic pain is real. And if you look at 342 00:19:44,640 --> 00:19:48,960 Speaker 3: fertilizer prices, they tend to cycle, just like all other commodities. 343 00:19:49,520 --> 00:19:52,679 Speaker 3: The last time we really saw an amplified price cycle 344 00:19:52,800 --> 00:19:56,280 Speaker 3: for fertilizer was seven and eight, kind of in line 345 00:19:56,320 --> 00:20:00,639 Speaker 3: with the financial crisis. But what makes this difference is 346 00:20:01,119 --> 00:20:03,240 Speaker 3: in contrast to I think it was a more of 347 00:20:03,240 --> 00:20:06,080 Speaker 3: a demand cycle in No. Seven and eight that caused 348 00:20:06,080 --> 00:20:10,280 Speaker 3: the amplification. But this time this is a supply side crisis. 349 00:20:10,440 --> 00:20:12,960 Speaker 3: You know. I think about this as like a three 350 00:20:13,040 --> 00:20:16,600 Speaker 3: legged stool. We've taken China out of the market, Russian 351 00:20:16,640 --> 00:20:21,680 Speaker 3: supply seemed difficult to acquire, and now you throw in 352 00:20:22,400 --> 00:20:25,240 Speaker 3: we have this global choke point for urea. In the 353 00:20:25,280 --> 00:20:28,240 Speaker 3: straight up horror moves, we're almost let's say, you know, 354 00:20:28,280 --> 00:20:31,119 Speaker 3: forty percent of the nitrogen that we need is you 355 00:20:31,160 --> 00:20:34,720 Speaker 3: can't get it. Those are the supply side drivers that 356 00:20:34,760 --> 00:20:38,680 Speaker 3: are keeping fertilizer prices at mid cycle level for I 357 00:20:38,720 --> 00:20:40,840 Speaker 3: think much longer than many in the industry would have 358 00:20:40,880 --> 00:20:44,399 Speaker 3: expected when this started in twenty twenty one. 359 00:20:44,760 --> 00:20:47,080 Speaker 2: When you say you can't get it, do you foresee 360 00:20:47,080 --> 00:20:50,520 Speaker 2: a situation where you can't get it at any price? 361 00:20:50,640 --> 00:20:55,000 Speaker 5: Basically, Oh, Tracy, my eCOM professor would roll over and 362 00:20:55,119 --> 00:20:58,960 Speaker 5: is great if I ever said that, But I'll just 363 00:20:59,080 --> 00:21:02,680 Speaker 5: kick it back to you know, applying fertilizer. 364 00:21:02,800 --> 00:21:05,040 Speaker 3: You know, you have to do it when the crop 365 00:21:05,200 --> 00:21:08,320 Speaker 3: wants it. So that's really pre planting and during the 366 00:21:08,480 --> 00:21:11,600 Speaker 3: early emergence of your crop, it's you know, having a 367 00:21:11,680 --> 00:21:15,520 Speaker 3: kid and needing to feed them, you know, vitamins at 368 00:21:15,560 --> 00:21:18,200 Speaker 3: a certain point in there as they start to grow. 369 00:21:18,440 --> 00:21:20,720 Speaker 2: Sorry, everyone knows, after they're three years old, you don't 370 00:21:20,720 --> 00:21:22,760 Speaker 2: have to feed them anymore. They for themselves. 371 00:21:23,520 --> 00:21:24,280 Speaker 1: At that point. 372 00:21:25,600 --> 00:21:28,199 Speaker 3: You're on your own. Go fix me a hot dog. Yeah, So, 373 00:21:28,760 --> 00:21:32,960 Speaker 3: if you miss the UREA application window, it's really difficult 374 00:21:33,040 --> 00:21:36,560 Speaker 3: to go back or nearly impossible to go back and 375 00:21:36,600 --> 00:21:39,840 Speaker 3: apply nitrogen. You just will have to take the yield penalty. 376 00:21:40,760 --> 00:21:43,600 Speaker 1: Yeah, it's interesting. You know, again, just looking at the 377 00:21:43,640 --> 00:21:46,960 Speaker 1: pure urea chart you mentioned, you know, some of the 378 00:21:47,040 --> 00:21:49,000 Speaker 1: legs of the stool have already been kicked out. So 379 00:21:49,080 --> 00:21:52,359 Speaker 1: the lowest it got after the Ukraine invasion of Ukraine 380 00:21:52,600 --> 00:21:56,000 Speaker 1: was still not anywhere close to say pre Ukraine or 381 00:21:56,040 --> 00:21:59,359 Speaker 1: pre pandemic levels at all. So we've shifted into a 382 00:21:59,440 --> 00:22:04,919 Speaker 1: higher rehen generally even before the war in Iran. So 383 00:22:05,080 --> 00:22:07,840 Speaker 1: when we're talking about oil markets, we know that there's 384 00:22:08,000 --> 00:22:10,760 Speaker 1: infrastructure that's already been destroyed. So even if the Straight 385 00:22:10,800 --> 00:22:13,000 Speaker 1: of Horn Moves has opened in a short time, there's 386 00:22:13,080 --> 00:22:16,160 Speaker 1: infrastructure that's been damaged. And of course we know wells 387 00:22:16,160 --> 00:22:19,119 Speaker 1: have been shut in because they're running out of storage 388 00:22:19,119 --> 00:22:23,040 Speaker 1: space for oil. What do we know about the fertilizer 389 00:22:23,280 --> 00:22:27,119 Speaker 1: infrastructure period, you know, the damage that's been done, and 390 00:22:27,200 --> 00:22:30,280 Speaker 1: so like you know, say there's a miracle and suddenly 391 00:22:30,680 --> 00:22:34,640 Speaker 1: things started flowing through the Strait of Horror Moves immediately tomorrow, 392 00:22:34,640 --> 00:22:37,359 Speaker 1: which doesn't seem very likely. What do we know just 393 00:22:37,359 --> 00:22:39,760 Speaker 1: about the condition of the infrastructure and how long it 394 00:22:39,800 --> 00:22:41,320 Speaker 1: would take things to get moving again. 395 00:22:42,280 --> 00:22:44,639 Speaker 3: Yeah, that's a great question. I think we'd be looking 396 00:22:44,680 --> 00:22:49,160 Speaker 3: at least two weeks before you'd start to see fertilizer 397 00:22:49,200 --> 00:22:53,160 Speaker 3: come out along the strait. Again, we haven't seen much 398 00:22:53,200 --> 00:22:57,080 Speaker 3: in the way of these facilities being attacked directly, okay, 399 00:22:57,240 --> 00:23:00,480 Speaker 3: and so a lot of the manufacturing sites have shut 400 00:23:00,520 --> 00:23:04,920 Speaker 3: down preemptively. And so then to restart a fertilizer facility, 401 00:23:04,960 --> 00:23:07,480 Speaker 3: it's going to take two or three days of a 402 00:23:07,560 --> 00:23:10,560 Speaker 3: natural gas burn just to get the plant to where 403 00:23:10,600 --> 00:23:13,439 Speaker 3: it is producing urea again. And then you have to 404 00:23:13,480 --> 00:23:15,760 Speaker 3: load of you have to bring a vessel in, you 405 00:23:15,800 --> 00:23:17,520 Speaker 3: have to load the vessel, you have to get it 406 00:23:17,560 --> 00:23:21,919 Speaker 3: back out. And nobody at this point has any clarity 407 00:23:22,040 --> 00:23:25,679 Speaker 3: on when the strait reopens who gets first priority? Is 408 00:23:25,720 --> 00:23:28,440 Speaker 3: it oil or is it fertilizer. I'm just going to 409 00:23:28,520 --> 00:23:32,640 Speaker 3: guess oil we'll get the priority. So you know, once 410 00:23:32,720 --> 00:23:35,119 Speaker 3: this has a clear end date, at least two to 411 00:23:35,160 --> 00:23:38,200 Speaker 3: three weeks before we see fertilizer come back out of 412 00:23:38,240 --> 00:23:38,720 Speaker 3: the molas. 413 00:23:54,920 --> 00:23:57,720 Speaker 2: So obviously everything is still in flux. And I should 414 00:23:57,720 --> 00:24:00,520 Speaker 2: just add our standard disclaimer, which is where recording this 415 00:24:00,720 --> 00:24:03,760 Speaker 2: on March tenth, and who knows what will happen by 416 00:24:03,800 --> 00:24:07,800 Speaker 2: the time this episode comes out, But how do you 417 00:24:07,840 --> 00:24:12,560 Speaker 2: anticipate this actually feeding into food prices. I mean, this 418 00:24:12,600 --> 00:24:16,359 Speaker 2: is the big question. So people use less fertilizer, you 419 00:24:16,440 --> 00:24:19,960 Speaker 2: get lower yields, Supply goes down, I assume prices go up. 420 00:24:20,320 --> 00:24:23,560 Speaker 2: Or you have farmers that continue to use fertilizer but 421 00:24:23,600 --> 00:24:25,399 Speaker 2: it costs them a lot more and so they have 422 00:24:25,440 --> 00:24:28,080 Speaker 2: to offset it with higher prices, and prices still go up. 423 00:24:29,240 --> 00:24:31,680 Speaker 3: Yeah, I'll think about this in sort of a timeframe 424 00:24:31,720 --> 00:24:34,040 Speaker 3: of when we might start to see some of this 425 00:24:34,880 --> 00:24:39,000 Speaker 3: flow through the system. It's the relationship between fertilizer prices 426 00:24:39,040 --> 00:24:41,400 Speaker 3: and when that piece of food arrives on your dinner plate. 427 00:24:41,480 --> 00:24:44,120 Speaker 3: There's a lot of decisions and price inputs to how 428 00:24:44,160 --> 00:24:47,840 Speaker 3: that all works. But so what we're thinking right now 429 00:24:48,160 --> 00:24:51,800 Speaker 3: is we'll see that. In fact, the market's calling for 430 00:24:51,880 --> 00:24:55,280 Speaker 3: a reduction of nitrogen application rates here in the US, 431 00:24:55,520 --> 00:24:59,240 Speaker 3: and so I'm looking at what I might expect for 432 00:24:59,440 --> 00:25:03,800 Speaker 3: US cornyields to be this year. Last year we had 433 00:25:03,840 --> 00:25:06,359 Speaker 3: a yield of one hundred and eighty six bushels per acre. 434 00:25:06,640 --> 00:25:09,600 Speaker 3: I'm thinking at this point that we could see the 435 00:25:09,720 --> 00:25:13,840 Speaker 3: US corniold be one hundred and eighty two bushels. But again, 436 00:25:14,040 --> 00:25:17,240 Speaker 3: we still have a long road of production potential ahead 437 00:25:17,280 --> 00:25:20,720 Speaker 3: of us. A lot of the cornield depends on what 438 00:25:20,800 --> 00:25:23,960 Speaker 3: the weather looks like during the summer season, how soon 439 00:25:24,040 --> 00:25:27,560 Speaker 3: farmers can get out there and plant. And then also, 440 00:25:28,000 --> 00:25:31,080 Speaker 3: you know the thing about commodity prices is they'll snap 441 00:25:31,240 --> 00:25:34,920 Speaker 3: up and then at these levels, you know I mentioned earlier, 442 00:25:34,960 --> 00:25:37,439 Speaker 3: this is a record. We are expecting to see a 443 00:25:37,480 --> 00:25:41,720 Speaker 3: record urea a corn price ratio that will destroy a 444 00:25:41,760 --> 00:25:47,000 Speaker 3: lot of urea demand. And so if the straight reopened 445 00:25:47,200 --> 00:25:50,840 Speaker 3: next week, you know you would see urea price is 446 00:25:50,920 --> 00:25:54,880 Speaker 3: sort of snap back to before. Maybe you would see 447 00:25:54,880 --> 00:25:57,200 Speaker 3: them snap back to where they were before this war. 448 00:25:57,359 --> 00:26:02,000 Speaker 3: So thinking about like food production and the relationship with this. 449 00:26:02,240 --> 00:26:05,480 Speaker 3: So we're planting now in the spring, I'm expecting lower 450 00:26:05,720 --> 00:26:09,280 Speaker 3: yields for corn. For example, that corn isn't going to 451 00:26:09,320 --> 00:26:14,760 Speaker 3: get harvested until probably about September or October of this year, 452 00:26:15,160 --> 00:26:17,840 Speaker 3: and then it'll have to move to let's say a 453 00:26:18,000 --> 00:26:22,280 Speaker 3: milling location or an ethanol plant. Lower yields is going 454 00:26:22,320 --> 00:26:24,440 Speaker 3: to be something that will move through the food production 455 00:26:24,560 --> 00:26:27,760 Speaker 3: system over a timespan of about a year or two. 456 00:26:29,240 --> 00:26:32,080 Speaker 2: All right, Alexis, thank you so much for coming on 457 00:26:32,119 --> 00:26:35,640 Speaker 2: a blots and finally letting us talk fertilizer. I wish 458 00:26:35,680 --> 00:26:38,840 Speaker 2: it was under better circumstances, but this was absolutely fascinating. 459 00:26:38,880 --> 00:26:40,200 Speaker 3: Thank you well, thank you. 460 00:26:40,080 --> 00:26:54,320 Speaker 4: For having me with my pleasure, Joe. 461 00:26:54,359 --> 00:26:56,000 Speaker 2: I'm never going to look at one of those little 462 00:26:56,119 --> 00:26:59,160 Speaker 2: packets that comes with flowers fresh flowers the same way. 463 00:26:59,160 --> 00:27:02,120 Speaker 1: Again, No, I I could. I never used this. I no, 464 00:27:02,520 --> 00:27:04,080 Speaker 1: maybe I put them in the water. I had no idea, 465 00:27:04,119 --> 00:27:06,399 Speaker 1: but no, that was super interesting. And the sort of 466 00:27:06,920 --> 00:27:10,159 Speaker 1: the money chart for me was really seeing that Urea 467 00:27:10,240 --> 00:27:13,400 Speaker 1: to corn futures ratio, which is very clean and very elegant, 468 00:27:13,880 --> 00:27:17,240 Speaker 1: and you can just see farmers are how much stress 469 00:27:17,240 --> 00:27:20,400 Speaker 1: they're already feeling and then how much additional stress they're 470 00:27:20,440 --> 00:27:23,359 Speaker 1: seeing just in the last weeks. But there haven't really 471 00:27:23,400 --> 00:27:27,520 Speaker 1: been good conditions for fertilizer costs really since the pandemic. 472 00:27:27,640 --> 00:27:29,919 Speaker 1: It has seemed like, in particular since the war in 473 00:27:30,000 --> 00:27:33,080 Speaker 1: Ukraine started this structural shift in supply. 474 00:27:33,480 --> 00:27:35,520 Speaker 2: Yeah, so there are a few things that stood out 475 00:27:35,560 --> 00:27:38,919 Speaker 2: to me. So Number one, tough times for farmers, and 476 00:27:38,960 --> 00:27:42,840 Speaker 2: it seems like in all these instances, the pain usually 477 00:27:42,880 --> 00:27:46,000 Speaker 2: falls on the smaller scale farmers versus the big ones. 478 00:27:46,040 --> 00:27:49,640 Speaker 2: I imagine in this particular situation, if you're a huge 479 00:27:49,840 --> 00:27:53,680 Speaker 2: farmer out in Iowa or wherever, you probably have enough 480 00:27:53,720 --> 00:27:57,880 Speaker 2: scale to ensure that you're still getting some sort of fertilizer. Yeah, 481 00:27:57,920 --> 00:28:00,520 Speaker 2: those business relationships are going to help you, is say 482 00:28:00,840 --> 00:28:04,359 Speaker 2: a small scale farmer who's like making these decisions on 483 00:28:04,400 --> 00:28:07,879 Speaker 2: an individual basis. The other thing that stood out to me, 484 00:28:07,920 --> 00:28:11,080 Speaker 2: and we've heard this before in our oil discussion with 485 00:28:11,200 --> 00:28:15,280 Speaker 2: Rory Johnston, this idea that well, again, the big fare better, 486 00:28:15,320 --> 00:28:17,600 Speaker 2: so the US is probably going to make it out 487 00:28:17,720 --> 00:28:21,520 Speaker 2: better than say in India, which needs gnat gas from 488 00:28:21,680 --> 00:28:24,280 Speaker 2: the Middle East in order to make its own fertilizer. 489 00:28:24,920 --> 00:28:26,639 Speaker 2: And then the other thing that stood out to me 490 00:28:27,160 --> 00:28:31,920 Speaker 2: was that idea of storage. So we know that in commodities, 491 00:28:32,280 --> 00:28:35,159 Speaker 2: storing something can cost a lot of money, and it 492 00:28:35,200 --> 00:28:39,320 Speaker 2: seems like fertilizer in particular hasn't really been stored in 493 00:28:39,320 --> 00:28:42,520 Speaker 2: the way maybe some other metals have been, because you know, 494 00:28:42,560 --> 00:28:44,720 Speaker 2: most of the time you only need it, I guess 495 00:28:44,760 --> 00:28:47,840 Speaker 2: twice a year, you know, once in the southern hemisphere 496 00:28:47,840 --> 00:28:49,400 Speaker 2: and once in the northern hemisphere. 497 00:28:49,520 --> 00:28:51,840 Speaker 1: Yeah, it does not seem as though the supply chain 498 00:28:51,920 --> 00:28:56,000 Speaker 1: has been optimized for sort of long term accumulation. There 499 00:28:56,000 --> 00:28:59,400 Speaker 1: aren't strategic urea reserves the way there are with other 500 00:28:59,520 --> 00:29:02,560 Speaker 1: commodity reserves. It's really going to be a mess. And 501 00:29:02,600 --> 00:29:04,920 Speaker 1: you know that was when we talked to Rory Johnston 502 00:29:05,320 --> 00:29:08,320 Speaker 1: about energy. And you know again in the US, it's 503 00:29:08,360 --> 00:29:10,360 Speaker 1: going to show up mostly at higher prices than the 504 00:29:10,360 --> 00:29:12,920 Speaker 1: pump elsewhere. It's going to show up as literally an 505 00:29:12,960 --> 00:29:16,760 Speaker 1: unavailability of reduction in the amount of energy, the amount 506 00:29:16,800 --> 00:29:20,640 Speaker 1: of oil that's capable. It's really disturbing to think, like, yeah, 507 00:29:20,800 --> 00:29:23,480 Speaker 1: I mean, no one wants to pay higher groceries, but 508 00:29:23,600 --> 00:29:26,600 Speaker 1: it's a lot better than outright family, which is the 509 00:29:26,720 --> 00:29:28,880 Speaker 1: risk when you do such a massive shock to the 510 00:29:28,960 --> 00:29:29,520 Speaker 1: food supplant. 511 00:29:29,800 --> 00:29:31,440 Speaker 2: Yeah, all right, shall we leave it there. 512 00:29:31,520 --> 00:29:32,240 Speaker 1: Let's leave it there. 513 00:29:32,360 --> 00:29:34,680 Speaker 2: This has been another episode of the aud Bots podcast. 514 00:29:34,760 --> 00:29:37,440 Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway 515 00:29:37,600 --> 00:29:38,760 Speaker 2: and I'm Joe Wisenthal. 516 00:29:38,800 --> 00:29:41,320 Speaker 1: You can follow me at the Stalwart. 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